U.S. data disappoint; Bank of Japan to boost monetary stimulus

SAN FRANCISCO (MarketWatch) — Gold futures settled at their highest in more than a month on Tuesday, as weakness in the dollar, the Bank of Japan’s decision to loosen its monetary policy and disappointing U.S. economic data lifted the metal’s safe-haven appeal.

For February delivery
US:GCG3
gold gained $6.20, or 0.4%, to settle at $1,693.20 an ounce on the Comex division of the New York Mercantile Exchange. That was the highest settlement for a most-active contract since Dec. 17, according to FactSet data.

Silver for March delivery
US:SIH3
gained 25 cents, or 0.8%, to end at $32.18 an ounce. Prices logged also their highest settlement since Dec. 17.

Tuesday’s gains in precious metals came as the Japanese central bank said it would continue its asset purchases on an “open-ended” basis to further expand its monetary stimulus. It formally adopted a 2% inflation target, replacing its previous target of a 1% inflation level. See: Bank of Japan to adopt 2% inflation target.

In a note Tuesday, Julian Phillips, contributor and founder at GoldForecaster.com, said he expects to see Japanese investors — “fully aware that this policy will weaken the buying power of the yen both at home and abroad” — favor gold to turn this loss into a gain.

Sales of existing homes fell 1% in December to a seasonally adjusted annual rate of 4.94 million, according to data from the National Association of Realtors. Economists polled by MarketWatch expected a rate of 5.1 million. See: Sales of existing homes tick down in December.

India ups duties on gold

Gold investors, however, seemed to shrug off news from India, where the government on Monday raised duties on gold imports to 6% from 4% to reduce the country’s high current-account deficit.

Reuters

India hikes duties on gold imports to 6% from 4%.

“India’s gold import duty hike had been telegraphed for some time so there’s little effect there,” said Tahiliani.

Analysts at Commerzbank said the Indian government hopes that the move will “noticeably reduce gold imports, which have mainly contributed to the country’s current account deficit to date.”

“When India doubled the duties on gold imports to 4% last March, imports plunged by 25% in 2012. The All India Gems & Jewellery Trade Federation thus now expects this year also to see gold demand — and therefore gold imports — falling by 15-20%,” the analysts said.

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